In the U.S. alone, marketers spend more than $230 billion per year on advertisements to acquire new customers. Yet, there is no good way to target these advertisements and promotions at those buyer entities—such as individuals and businesses—who are most likely to become valuable customers.
In fact, the customers who take advantage of promotions are often those that are least likely to be valuable repeat customers in the future. For many product categories, the best buyer entities are those that are too busy to hunt for a promotional offer that is available to everyone. An offer of a free sample or a $20 rebate on the first purchase is generally most attractive to those whose opportunity cost of time is the lowest.
Marketers suffer from improper targeting of their promotions and so do buyer entities. If marketers would have a better way of identifying those buyer entities with a high purchase propensity for their products and direct promotions only at them, these promotions would be significantly more lucrative. Marketers would fight for these good customers with better introductory prices and other promotions, as well as with better products and better service. They would be willing to pay or otherwise reward these customers for the right to advertise to them. A marketer who can direct her customer acquisition efforts at those buyer entities who are—on the basis of their past purchase histories—most likely to become valuable customers can afford to divert resources from less efficient and less targeted advertising channels.
Yet, marketers generally cannot not access information on the purchases of a buyer entity who has not yet been acquired and on the purchases that an existing or potential customer makes with other companies. It is the object of this invention to solve this problem, and to do so at a minimal loss of privacy to participating buyer entities.
Because information on a buyer entity's purchases is so valuable, some of the companies that have offered only the slightest, very imprecise and restricted glimpse at a buyer entity's past purchase history with other companies have been able to reap great rewards in the marketplace. The current efforts by businesses to capture or infer information about a buyer entity's purchases with other companies can be categorized into two broad categories:
1. Asking buyer entities questions about their purchase interests and/or past purchases with other companies.
2. Establishing a network of non-competing vendors who share information with each other about a customer's past purchases, and who sell this information to other non-competing businesses.
Both of these methods have significant drawbacks.
The first method is practiced by several direct marketers, such as Fingerhut Companies, Inc, YesMail, MyPoints and Netcentives. These companies ask their m embers questions relating to their purchase interests and habits for the purpose of sending them targeted advertising messages. The main drawback of this method is that information given by customers about their past purchases cannot be properly verified. In fact, because these companies cannot verify information about purchases obtained in this manner, they cannot pay higher rewards to members who claim to have stronger and more relevant purchase histories without encouraging false or misleading answers. In fact, to date, none of these companies is known to have implemented a system of differential rewards.
Also, buyer entities generally give highly unreliable answers to questions asked by web sites and direct marketing companies, even when their answers do not affect the benefits that they get when using the service. Additionally, answering questions takes time which the buyer entity may not be willing to give and which also ties up the network.
The second method is practiced most prominently by Abacus Direct, which is now a division of Doublecklick, Inc., and which uses purchase records obtained from catalog sellers for marketing research and other marketing purposes.
The main drawback of this method is that Abacus Direct and other companies that compile transaction data from certain marketers cannot—and do not—allow other marketers to use this information for the purpose of directly competing with those who provide the information in the first place.
For instance, a national jeweler might be able to use Abacus Direct to review a list of those who have bought expensive clothing. But Abacus Direct cannot allow him to review a list of consumers who have bought jewelry itself. Abacus would have obtained that list from another jewelry retailer, and is therefore obligated to the provider of that list that it not be used by his competition.
Furthermore, because these companies obtain records from a limited number of marketers, they obtain only very fragmented information on individual customers or business entities. Abacus Direct, for instance, maintains records that cover many million households, but with very limited information about the average household in its database.
Moreover, for these companies, the process of obtaining permission to send Emails to a customer is separate from the process of obtaining information about the customer's purchases. Email is by far the most powerful direct marketing technology available today. But an established reputable company cannot send Emails to customers without first having obtained the customer's permission to do so. Therefore, only a small fraction of the purchase records obtained by Abacus Direct are used for the purpose of direct online marketing.
Besides the above described efforts by businesses to capture information about a buyer entity's past purchase history with other companies, credit card companies or banks working with electronic bill payment and presentment companies can also use the purchase information that they have on many buyer entities for the purpose of targeting advertisements and promotions. However, these players face the same problem than the one described above for networks of non-competing merchants: they cannot allow marketers to use the information that is provided by participating companies for the purpose of competing with the very same companies that provide the information.
A credit card company for instance, like American Express, cannot reasonably hope to retain it's merchants as clients if it was to potentially use the information obtained from these clients to grant the competition access to its' clients proprietary customer lists. The same is true for so-called “Electronic Bill Payment and Presentment Companies” (“EBPP's”) such as the Checkfree Corporation, and banks working with EBPP's to present bills to their customers online. These companies present bills to buyer entities and allow buyer entities to pay these bills electronically. The bills are, generally, directly obtained from billers, the companies that issue those bills. If these EBPP's or the banks working with these EBPP's allow other companies to use the bill payment and presentment process for the purpose of promoting products that directly compete with those that are being paid, billers will no longer transmit their bills to these EBPP's.